Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. How does a 90 percent cover percentage differ from a deductible, on a large loss?
A deductible takes off a fixed amount and fades away on large losses, a cover percentage takes off a proportion and weighs more the heavier the loss
The two instruments behave differently exactly where it matters, on a large loss: a deductible of a hundred thousand is nothing against a ten million loss, a ten percent retained share is a million. Confusing them makes the rest of the module come out wrong, starting with comparing two quotes. The answer seeing only line vocabulary is the most tempting because it is half true, the word is indeed trade credit's, and it conjures away the difference in behavior. The one stacking them describes machinery that exists in some policies and which, precisely, does not make them equivalent: it combines them.
Glossary entry · franchise2. What does the retained share buy the insurer, and when?
Alignment at three moments: choosing buyers before, suspending and chasing during the default, supporting recovery afterward
The underlying reason is that trade credit covers a risk the insured partly controls, unlike a fire: it decides who it sells to, on what terms and up to what exposure. An instrument relieving it entirely would turn a commercial decision into a costless bet, which is why a hundred percent cover barely exists. The reduced exposure answer is true and is an effect, not the function: it would describe a deductible just as well. The one about a safety margin confuses moral hazard with pricing error, two problems handled by different tools.
Glossary entry · assurance-credit-export3. Two quotes differ by ten points of cover. What does that gap compare against?
Expected losses for the year: ten points of cover are worth ten percent of expected losses, and that is the figure to set against the extra premium
Limits are never all drawn, and an exporter comparing ten points against its outstandings will always conclude that the higher cover is cheap: it is wrong by an order of magnitude, the kind of error no later negotiation recovers. The three wrong answers name real figures, all of which appear in the file and all of which measure activity rather than loss. That is what makes them credible: they are in plain sight, while expected losses have to be estimated.
Glossary entry · assurance-credit-export4. One quote offers 95 percent cover with unfavorable recovery sharing, another 85 percent with strict pro rata sharing. What should be said?
The comparison is not settled by the rate: on files that recover well the sharing clause decides, and 85 pro rata can yield more
Comparing rates without reading the sharing clauses means comparing two numbers that do not measure the same thing. The conclusion depends on the portfolio's recovery rate, so neither quote wins as a matter of principle, and that is what has to be said: the two answers deciding outright, in either direction, make the same mistake with opposite preferences. The answer calling them equivalent reasons correctly, the clause does operate after indemnification, and draws the opposite conclusion: it is precisely because it operates afterward that it decides what actually comes in.
Glossary entry · subrogation5. The module points to a trade off that sits outside the insurance contract. Which one, and with whom is it settled?
The cost of financing: the retained share stays an exposure on the balance sheet, the cover rate enters the invoice discounting decision, and the counterpart is the CFO
A higher cover rate can be paid for partly outside the premium, through cheaper financing, and it is one of the rare decisions in this line where the right counterpart is neither the insurer nor the broker. The practical point is that an answer can be worth more than the premium gap argued over for three weeks, and it takes one question to get. The three other answers name real trade offs internal to the insurance or the commercial relationship: they get dealt with, and none takes the cover rate outside the insurance department, which is precisely what the module asks to be seen.
Glossary entry · credit-caution